Exam 16: Country Risk Analysis

An MNC has a foreign manufacturing plant to capitalize on cheap production costs; the MNC exports all the goods produced. It should be most concerned about the country's:

Higher interest rates tend to increase the growth of an economy and increase the demand for an MNC's products.

A ____ currency may ____ the volume of products imported by the country and therefore reduce the country's production and national income.

Adjustments to incorporate country risk into the capital budgeting analysis would involve either the addition of a risk premium to the discount rate or a reduction of the cash flows.

A micro-assessment of country risk:

Higher interest rates in a foreign country tend to ____ the growth of an economy and ____ demand for the MNC's product.

When a country's currency is inconvertible, the earnings generated by a subsidiary in that country cannot be remitted to the parent through currency conversion.

If a foreign country's consumers tend to only purchase products that are produced locally, the least effective strategy for a U.S. firm is to:

Which of the following is probably the best method of incorporating country risk into a capital budgeting analysis?

The Delphi technique:

The most important variable in determining a country's degree of overall country risk:

____ involve(s) the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

Which of the following is not an example of political risk?

Insurance purchased to cover the risk of expropriation ____, and will typically cover ____.

According to the text, country risk analysis has:

An MNC must assess country risk not only in countries where it currently does business but also in those where it expects to export or establish subsidiaries.

Country risk analysis is important because it:

Macro-assessment of country risk refers to an overall risk assessment of a country without consideration of the MNC's business.

U.S.-based MNCs could avoid country risk by simply avoiding international business.

Which of the following is not a technique to assess country risk?